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When It Comes To Investments, Take The ‘Cool Parent’ Approach

They are near and dear to our heart. We worry over them. We pray no harm comes to them. We sometimes have irrational expectations for them, but darn it, we just want them to grow up strong and healthy!

I’m talking about our investments, of course. What did you think? Our children? Well, yes. Them, too.

Seriously. Listen to some folks in the office break room discussing their stock holdings or 401(k). They sound like parents — either bragging or wringing their hands. “So, anyway, I bought it eight years ago at 21, and now it’s settled in nicely in the 60s. I think it’s going higher.” Or, “I just don’t know what’s going on with that Disney of mine. It’s been so good until this year. I never liked that ESPN crowd it hangs out with, and sure enough, ESPN’s subscriber base is down, taking Disney’s price with it. Sigh … .”

It’s no surprise that money can elicit nearly as much emotion as children. As a dad of four boys, every day I live the fact that our kids are central to our lives and represent both what we’ve accomplished and our hopes for the future. Given that reality, I’d like to suggest that we look at our investments the way experienced parents look at their second or third child.

Those moms and dads have confidence that their offspring are fundamentally good young people, who were well raised and will grow up just fine. They don’t lose that confidence when their daughter dyes her hair purple, or their son plays too many video games. So long as the grades stay good, and the cops don’t show up, these parents remain (largely) serene. This, after all, isn’t their first rodeo. Child No. 1 is now safely ensconced in a reputable and affordable college despite his own minor shenanigans.

How about viewing your portfolio that way? That’s easy to do if you raise it well. That means setting specific long-term goals, developing a thoughtful, consistent strategy to achieve those objectives, and populating the portfolio with quality investment vehicles — stocks and bonds issued by healthy, highly established companies.

Equally important, don’t impose excessive expectations on your portfolio. Every company you invest in will face tough times. The Apples of the world will struggle to meet everyone’s expectations and thus lose some value for a time. Big, strong Coke will battle changing tastes and health concerns. And, yes, dear Disney will face travails as its far-flung interests slug it out for entertainment and ad dollars.

When these things happen, be the cool mom and dad. Don’t freak out, or ask your temporarily challenged stock why it can’t be like Amazon down the street, which just goes up and up and up and makes its owners so proud. Don’t be too quick to disown them or put them up for adoption.

So long as its fundamentals remain sound, continue to believe that your problem investment will recoup from whatever it’s dealing with and go on to make you proud. And live in the moment. Yes, investing is about the future. But in this time of very low interest rates — as cash pays nearly zero! — take comfort in knowing that the companies that you own are currently doing a good job of storing the value of your money. And, if you have chosen an income-oriented strategy, your holdings are also making you proud by feeding your nest egg a steady stream of dividends and interest.

Next time you find yourself getting angsty over the impact of a Brexit or Fed rate hike, or slumping oil prices, just remember the great parenting and investment wisdom of the Who: “The kids are alright.”

 


 


 

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